GOL states Brazilian airports will reach capacity before World Cup

GOL Airlines CEO Constantino de Oliveira Jr stated that even is all airport investments in Brazil go ahead as planned, the country will still reach full airport capacity before the 2014 Football World Cup (Financial Times, 18-Nov-2010). Twelve Brazilian cities will host World Cup events. Traffic forecasts by Infraero estimate traffic could increase from 119 million passengers in 2009 to 165 million in 2014. Infraero has committed USD3.5 billion to airport upgrades prior to the 2104 World Cup and 2016 Rio De Janerio Olympic Games. Between 2007 and 2010 Infraero invested only USD478 million of the USD1.6 billion set aside for airport investment.

You may also be interested in the following articles...

Enter Qatar Airways. As Etihad Airways looks to bed down its investments in other airlines, Qatar is gradually expanding its airline investment portfolio. Qatar's 15% stake in IAG is now being followed with a 10% stake in LATAM for USD613 million – nearly 1.5 times Qatar's net profit of USD446 million, disclosed (for the first time) on the day prior to the LATAM equity announcement. It is a safe investment; LATAM group has a strong market position and its share price has remained strong even in the face of a brutal downturn in Latin American economies.

Qatar gives LATAM needed cash and a distant shareholder. Latin America is the smallest market by far for Gulf airlines, but while currently in the economic doldrums, has a longer term potential for growth. It is also a key future market for US airlines, albeit very small on the Gulf airlines' networks. Qatar is spending nearly EUR2.5 billion on equity investments, still smaller than Etihad's but illustrating a willingness to acquire airline assets, for investment and strategic reasons. In this case the immediate strategic purpose for Qatar is less apparent.

Star Alliance's privately owned Avianca is also considering a strategic shareholder; that would mean five of Latin America's eight largest airline groups could have an airline investor from outside the region.

After two years of weak demand and pricing, some signs of stabilisation are emerging in Brazil; however the country’s two largest airlines are adopting an understandably cautious tone in their assessment of the operating environment. Although both LATAM Airlines Brazil and Gol have significantly reduced their domestic capacity during the last year and a half, both airlines have concluded that some excess supply remains in the market place. Fast-growing Azul has opted to slow its capacity growth in 2016, but Brazil’s fourth largest airline Avianca Brazil has continued growth in order to build its market share within the country.

LATAM Airlines Brazil also believes its performance on routes between the US and Brazil is improving, which is a similar conclusion drawn by US airlines operating between the two countries. For LATAM, the improved performance is offsetting some weakness on other long haul routes from its Spanish-speaking countries.

Neither airline has offered specific capacity guidance for 2017, but LATAM Airlines Brazil and Gol are likely to keep their supply restraint intact. Pricing in the domestic market has yet to stabilise, and competitive capacity actions will result in those airlines keeping their own ASK increases at bay in order to sustain a favourable supply/demand balance.